AI, earnings and inflation risks 10/20/26

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1:16Good Tuesday morning. Let's get a check on U.S. stock futures after a modest bounce back for the NASDAQ and the S &P 500 yesterday, even as the Dow ended in the red. You can see it's a mixed picture on the screen this morning. S &P is poised to open fractionally lower, down about two points, three points. Dow higher by about 106 points, and the Nasdaq down about 143 points as of right now. The big focus remains on big tech. More weakness, as we are seeing pre-market here this morning, CoreWeave and others ahead of the open. Let's get a check on what we see with some of the neocloud companies. CoreWeave is down almost 3 percent right now.

1:48Nebius also down 3 percent. Similar moves for IREN and other names, including the Roundhill neocloud ETF, which sweeps them all up. Keep in mind, we're getting key reading on neocloud spending and that conversion to revenue when we get SpaceX results after the bell later today. But in the meantime, let's get a check on the bond market, too, because Treasuries, as we await September housing starts and building permits before the open, pending home sales are going to be out at 10 a.m. Eastern as well. You can see yields are a bit lower across the curve. U.S. 10-year Treasury yielding 5.11 percent, The Fed-sensitive two-year Treasury, 4.75 percent.

2:24And a 30-year, 5.45 percent. Earnings season is going to begin ramping up in earnest today. We've got a flurry of aerospace and defense companies out before the bell. And industrials overall, I should add. But GE Aerospace, Northrop Grumman, and RTX. And we get a check on those names ahead of their reports. You can see RTX is actually up 1 percent right now pre-market. A rough few months, though, since the last report for the defense primes and other aerospace players as well. Well off their most recent 52-week highs. I mean, look at these numbers here. Northrop Grumman, for example, down 34 percent.

2:59And this is in the midst of an act of war in the Middle East. Even busier after the close with Netflix, though. SpaceX, as I just mentioned, you got airlines reporting, too. We got much more on all of that coming up throughout the hour. And let's also get a check on energy, which, of course, which will funnel back to the airline earnings picture. as well. You can see crude is climbing this morning. WTI is up more than 4%, spiking above $108 a barrel now. Brent is up 1.5%, and that is right around$111 a barrel. And refined products are also moving higher, those futures contracts. Let's see how Europe and Asia are shaping up.

3:33Steve Sedgwick is in London with more on all of it. Steve, great to see you, as always. Morgan, great to see you. I have got a story for you for a stock that I could hold my hands up. I've never heard of it before today. It's going to blow my mind today. I think it might blow the minds of the viewers as well, what's happened here. So Asian stocks retreated today with South Korea's Kospi sinking into bear market. Bear in mind, your Nasdaq's only down 4.7 percent. Despite everything we saw last week, it's only down 4.7 percent from a record high. The Kospi has entered bear market. And all our viewers know by now, you've got two very, very big semiconductor names in there, Samsung and SK Hynix, which are the big drivers of that.

4:15But investors are now, of course, looking to all those big tech names you mentioned this week, Netflix, SpaceX, Tesla, Meta. But this next company, I'll show you. Oh, my goodness me. This story is interesting. I'm going to show you a board now of a company called Elise. Elise Group shares in South Korean AI cloud service provider Elise Group getting a cold reception on market debut, plummeting around 30 percent on the Cosby today despite huge demand for its IPO. Let me take a stop there. This stock, where's the support operation from the book runners? It's down 32 percent. Demand before it IPO'd from the book build, it was nearly 400 times oversubscribed from the institutions.

4:57It was over 400 terms subscribed on the retail portion. And yet the stock is down 32 percent. Now, I know a thing or two about markets, but there's loads of things I'm learning every day, Morgan. A stock that was 400 times oversubscribed couldn't find a support operation with 30 % coming off it. But you'll like this bit as well. This is fascinating. Who do you think are the book runners? I didn't know this. There's a company called Marae, which is a big company down in South Korea. There's also a little company called Samsung Securities, which is a listed subsidiary of Samsung. You can't write this stuff.

5:34Anyway, there's growing concern, of course, in the neoclouds, which I think neocloud is, is that the most toxic word in AI at the moment? I don't know. Growing concern over debt, borrowing costs and returns on AI investment, weighing on sentiment with one analyst saying, build any cost AI narrative is now shifting to who is paying and for how long. European equities, by the way, also under a little bit of pressure. But for me, this company that I've never heard of, that was 400 times oversubscribed, that can't support itself a third down on the day. That is a story and a half, a metaphor for our times, perhaps, Morgan.

6:03All right. Steve Sedgwick, it is a story and a half. Thank you for bringing it to us. We're going to dig into that throughout this hour and beyond. Let's turn now to the developing story that we continue to monitor, which is the unrest in France. Paris police overnight issuing curfews in two areas of the French capital after protests and riots last weekend, targeting government buildings, city halls and thousands of businesses across the country. A number of other cities also announcing curfews of their own. Along with the curfews, though, Paris officials are also banning gatherings and public demonstrations.

6:34But France is not alone. An autumn of discontent is seeing scenes of protests, some violent spreading across Europe, over rising energy costs, the state of schools, declining public services, housing affordability crisis. Young people in Italy are calling for a general strike on November 20th. With similar actions planned for earlier next month in Spain And in Portugal, anti-government protests are also gripping Albania's capital, with students calling for that country's socialist prime minister to resign. Well, let's turn to Charlotte Reid in London with more. Charlotte.

7:10Good morning, Morgan. Well, we see this morning that the French stocks remain under pressure today while the French-born years are edging lower. After the biggest daily rise in nearly a month on Monday, The riots in France have sent shockwaves to European financial markets as government bond yields surged in response to domestic unrest. Now, overnight curfews have been put in place in a number of French cities following the riots and looting over the weekend. Areas of the cities of Paris, Lille and Nice were partially locked down in order to limit disorder. The French Prime Minister, Sébastien Lecornu, said after an emergency cabinet meeting that he was focused on restoring public order but refused to back blanket curfews.

7:50The prime minister said that tonight, new curfews will be decided where the situation requires it.

7:59Charlotte Reid, thank you. Well, let's bring in MCC Global Enterprises CEO Michelle Caruso Cabrera. She's also a CNBC contributor. Michelle, I want to get your reaction to what we just laid out and what Charlotte just reported. The situation in France is enormously serious, and it's pretty clear the population doesn't understand what's coming at them. First of all, they've got to get the security situation under control because without it, you know, France is historically one of the most visited cities, if not the most visited city in the entire world. You're going to start to see tourism revenue fall.

8:32You can be sure that retail revenue has already started falling. They desperately need tax revenue because their fiscal situation is so bad. And then when I say the population doesn't understand what's coming at them, 25 percent of French government spending is on pensions. The retirement age is going to have to go up. It's the lowest in Western Europe. And the population does not want that to happen. The only person who tried to raise the retirement age is Emmanuel Macron, who's going to leave office in tatters. His rating, his approval rating is 15 percent because the population does not want these reforms.

9:07And yet with rising interest rates, their interest costs are 23 percent higher than they were a year ago. Every time they roll over this debt, it goes from what they used to pay, zero to two percent from the good old days of low interest rates to now four to six percent. So the cuts are going to have to come somewhere. And when you see these protests, you realize the population doesn't get that they're up against the wall. France has obviously sort of become the lightning rod for all this. But the fact that we are seeing these types of dynamics play out through other parts of Europe as well right now.

9:40We were talking about this two weeks ago. You had just gotten back from a trip in Spain, and obviously we've seen a call for snap elections there, too, in the midst of affordability issues around things like housing. I mean, is this I hate to use the word contagion, but is there an affordability crisis that is catching fire in Europe? Yes, but the core of it is that Europe doesn't grow. Europe has so many issues, so many things that so many self-inflicted wounds that prevents them from growing. We have an affordability crisis in this country, in the United States, because we are booming. What they have an affordability crisis over is the fact that interest rates are rising.

10:15They have to spend more on pensions. And yet at the same time, the population can't improve their salaries because the productivity levels are so bad. They've got so many things that they should be doing. There are two different reports put out, one by Enrico Letta, one by Mario Draghi, both former prime ministers of Italy, both very sound economists, talking about all the things that Europe couldn't and should do but haven't done. And so they don't grow. That's the biggest problem. They can't grow out of their debt problems. I mean, it's such a key point that you're making here, especially when you compare what's happening in Europe and some of these major economies there to what's happening here in the U.S., where we're obviously facing our own affordability problems coming into a midterm election, where that is very much front and center, something we're going to talk about a little bit later in the show, too.

11:01When you have Germany, for example, today embracing NVIDIA and AI investment, Are we starting to see attempts to move towards a position of growth, even as in France, they're also trying to cut at least minimally from a fiscal standpoint, some of that spending from a budgetary standpoint? Yes. For example, today they're debating whether or not people who have a pension over 1300 euros should no longer get an inflation appreciation every time that that happens every year. It is possible. It's probably the only chance they have when you have a crisis is when you actually have an opportunity for change.

11:37Greece did not reform until they had to go through restructuring. Right. But now Greece trades better than France. Greece is actually doing quite well. Will we see France, Germany, these countries actually start to make changes? One of them would be when it comes to energy costs. They've imposed so many the equivalent of Green New Deal requirements. on them, which is driving up energy costs, which is leading to the deindustrialization of Germany. However, you're starting to see each country say, you know what, we can't do it right now, or maybe we can't do it at all. And that could be the green shoot, so to speak, of what could eventually lead to their ability to grow.

12:16I want to bring it back home in the sense that you've seen this sell-off in neocloud debt and debt tied to AI overall and questions about how different companies are going to raise more capital. I mean, those questions are coming up in part because we are seeing this global bond sell-off. Some of it is being sparked by what we're seeing in Europe right now. So just how to think about what we're seeing in the bond markets and how much of it is tied to this conversation we're having. Oh, a lot. Because, you know, go back to the basic laws of supply and demand. Suddenly there's a lot more supply coming online.

12:48And so the buyers can be a lot pickier about what they're going to actually buy and how much interest they're going to demand, especially if they expect inflation. So I think it's all interrelated, whether it's AI companies borrowing, whether it's governments borrowing, there's just a lot more debt out there. And so debt buyers can be a lot choosier as to what they want to do and how much they're going to get paid. All right, Michelle Caruso Cabrera, it's great to have you on, as always. Well, we've got a lot more to come here on Morning Call, don't we always? Including an anthropic windfall, one investor who got in early and maybe on his way to one of the largest individual returns when it makes its public market debut.

13:29Plus, one day after losing Microsoft, data center operator Nscale may have another winner on its hands. And later, a serial entrepreneur that may be on his way to creating his third billion dollar plus company. I want to get his thoughts on all of this and the tech landscape. Very busy hour. Still ahead when Morning Call returns. This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups.

14:04Have customers worldwide get payment details in 22 currencies, so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get Wise Business. Download the app. T's and C's apply. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini.

14:47Shipping, billing, admin, payroll, marketing. You're managing all the things. So why waste time sending important documents the old-fashioned way? Mail and ship when you want, how you want with Stamps.com. Print postage on demand 24-7 and schedule pickups from your office or home. Save up to 90 % with automated rate shopping. That's why over 1 million small businesses trust Stamps.com. Go to Stamps.com and use code PODCAST to try Stamps.com risk-free for 60 days. Welcome back to Morning Call. While a serial entrepreneur may be on his way to creating his third billion dollar plus company, Ajit Singh, founder of Nutanix and ThoughtSpot, taking his new venture out of stealth mode today.

15:29It's called Different and its mission is to take on a crucial need for startups. Marketing. Ajit Singh is with us live this morning in San Francisco. Ajit, I'm starting my day. I suspect you're probably in yesterday. Appreciate you being up late to have this conversation. Let's talk a little bit about Different and this company you're bringing out of stealth because it's AI marketing. Yeah, Different is an AI marketing system for lean B2B marketing teams. It allows them to compete against much, much larger companies because from one place, They can create, launch, and optimize campaigns across multiple channels, LinkedIn, Google, email, web, and AI search.

16:21And they can do that without requiring a pile of tools or very large agencies, things that only very, very large companies can afford. So how do you do this and compete with the likes of Meta or Alphabet or some of the other heavyweights in the marketplace that are, you know, also rolling out their own AI and their own applications around AI and presumably are going to target marketing too? Yeah, actually, you know, marketing is such a big word. Google or Meta or LinkedIn, these ad platforms, they're actually great partners for us. The challenge for B companies is that they don't have expertise to deploy their marketing budgets across all of these platforms and run very optimized campaigns.

17:05That's where a company like Different comes in. We allow them to create new ads, new emails, and launch them across all of these platforms. And then when the campaigns are running, the system can identify what is working well, what is not working well, how they should readjust their budget, what messaging is resonating with what sort of target audience they're trying to achieve. So a platform like Different actually makes it easier for B2B marketing teams to manage all their campaigns across these platforms. So I realize you're emerging from stealth. You're a startup. You're in the private markets right now.

17:44You've got a growth trajectory ahead of you. But in general, as we are having these conversations on CNBC day to day about what it is to raise capital in the market right now, whether it's public or private markets, what are you seeing as somebody who's been through tech cycles before? Yeah, really, for tech companies, it is a great time to raise capital. There is a lot of interest in AI companies, but compared to two years when chat GPT moment was just happening, now the investors have a lot more data in what type of companies will actually be able to make an impact. Across the stack, there is investment going into hardware, to AI infrastructure, to app companies like ours, and everything is getting transformed.

18:35So for a company like Different, we are announcing a$48 million seed round. We have a very strong team. My co-founders come from deep expertise in AI and marketing. So we were able to raise a relatively large seed because we are going after this huge problem that many companies face. Because AI infrastructure has become extremely powerful from OpenAI and Anthropic and Google. So you have these very powerful models. But these companies don't have a great way of running end-to-end B2B marketing on these models. They can automate individual tasks. But if they want to really create a leverage and a small team wants to take on a big company, it is very hard.

19:19And that's where the investment into companies like Different is going. Okay. Ajit Singh, great to have you on. Appreciate it. Thank you so much for having me. Well, we've got a market flash on NVIDIA. Reuters reporting that ByteDance, Alibaba, Tencent have ordered more than three million of the company's new RTX Pro 5500 graphics cards worth over$35 billion. The report adds that NVIDIA has told customers and partners it cannot guarantee that it can fill the orders because demand from Chinese technology companies far exceeds planned production. With one source adding partners might only receive five to 10 percent of the quantities requested.

19:58Well, straight ahead, Australia looking to take two social media giants to court for failing to comply with one high profile law. But first, two major producers of copper telling a very similar story this morning. The world's largest minor BHP reporting results is in quarterly copper output estimates, but keeping full year guidance in place. And it was a similar dynamic for Anglo-American, which saw quarterly copper production slip, but also maintained its forecast for the year. Both are citing extreme weather. They say that is in part to blame, speaking to the fact that it isn't just soft commodities being impacted by Mother Nature this year, something we've been following on the show for months now.

20:39Shares of both lower in trading. Nonetheless, copper is having a strong year, outperforming gold. It's up 16 percent so far, has strong demand driven by AI, electrification and defense spending, outstrips supply, a divide that's only expected to widen in coming years. Morning call. We'll be right back. This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees.

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22:40The government has doubled the maximum penalty for violations to more than 75 million U.S. dollars. And Transportation Secretary Sean Duffy is expected to announce today the FAA has certified Boeing 737 MAX 10 jet model. The whole industry has been waiting for this. That's what sources are telling Reuters. Duffy is scheduled to visit a Boeing factory in Everett, Washington, to tout the certification of the long-delayed version of the company's top-selling plane. Those shares are up half a percent right now. And a union representing Micron workers in Taiwan will launch a strike on Thursday. That will coincide with a meeting between the U.S.

23:14chipmaker and a separate union, escalating a dispute over employee bonuses. Micron has about 15 ,000 workers in Taiwan, where it makes DRAM and high-bandwidth memory chips. Those shares are down 2.5 percent. And Virginia Governor Abigail Spanberger says she won't support Nextera's nearly$70 billion takeover of Dominion Energy without a six-year freeze on residential power rates and a tripling of bill credits. Bloomberg says the governor is also demanding a pledge to lower energy costs and boost investment in efficient and clean energy. You can see those shares are basically unchanged here at Premarket.

23:50Still on deck, though, a federal judge refuses Saudi Arabia's offer to pay the bail for one of its citizens accused of planting a listening device at OpenAI HQ. We've got that full story when Morning Call returns. Hi, Morgan Brennan. Welcome back to Morning Call. Let's get a check on U.S. stock futures after a modest bounce back for the Nasdaq and the S &P 500 yesterday, even as the Dow finished in the red. You can see it's a mixed picture again this morning. The Dow is poised to open up about 112 points. The S &P down fractionally two points. Nasdaq under a bit of pressure here as we see semi-stocks and other AI-related names lower pre-market, poised to open down 145 points.

24:26Case of point, Neocloud, some of the biggest laggards on the Nasdaq 100 this morning. You can see right there on your screen, CoreWeave and Nebius both down 3 percent. Other names like Iron also down almost 3 percent. And it's not just cracks in credit in AI in U.S. markets either, because we have been talking about credit default swaps. Those are still at distress levels for five years for CoreWeave. Take a look at what's happening with SoftBank in Japan. The company CDS spread hitting a four-year high this morning as it looks to put more funding into open AI and eyes of potential acquisition.

24:58And we're going to have more on that story in just a moment. But shares of SoftBank in Japan trading down 6 % overnight. Let's also check on, speaking of credit and the debt markets broadly, let's check on the bond markets and treasuries specifically. U.S. 10-year treasury yielding 5.12%, though it's down a little bit. The Fed-sensitive two-year treasury up a bit, 4.76 percent, and the 30-year Treasury, 5.45 percent. Earnings season is really ramping up in earnest today. We'll call it kicking into second gear. A flurry of aerospace and defense companies out before the open, including GE Aerospace, Northrop Grumman, RTX.

25:35You could see it's a mixed picture right now. RTX is up about 1 percent, pre-market GE down fractionally. But we're going to have more results after the close as well, with Netflix, SpaceX, Airlines reporting as well. So much more on all of that coming up. Also 3M and GM this morning. But let's get a look at the energy picture because that too will funnel through to airlines and other industrial giants. And you can see we are climbing higher with crude oil prices. WTI is at more than 4 percent right now, trading right around 108 bucks a barrel. Brent crude is up one and a half percent. It is has definitely broken through 110 level that we flirted with again last week.

26:15We're a barrel. You can see refined product prices are also moving higher. Global markets, a negative finish to the trading day in Asia. The KOSPI and specifically trade in Korea in focus in part because there was an IPO there. We talked about it at the top of the show. We'll talk about a little bit more with our call crew that plunged 30 percent in its market debut. Altice, even though it was 400 times, give or take, oversubscribed. And if we take a look at early trading in Europe, you got red on the screen there too, with the German DAX down about eight-tenths of one percent and the French CAC also down about six-tenths of one percent as we continue to see unrest and protests playing out in France and across its major cities as well.

27:01We're checking some of the morning's latest headlines, though. U.S. Special Envoy Steve Witkoff will travel to Norway this week for the next round of talks to end the war in Ukraine. This, according to Reuters, which says that Wyckoff will also travel to Russia to meet with President Vladimir Putin. Ukrainian President Volodymyr Zelensky will reportedly attend the Norway meeting after accusing the U.S. of holding up deliveries of Patriot air defense missiles that are already paid for by European allies. Meanwhile, President Trump saying that while he has not agreed to a meeting with Vladimir Putin and Chinese President Xi Jinping on the war, he is potentially open to it.

27:38And Canadian Prime Minister Mark Carney praising early results in the referendum in the province of Alberta, showing that residents have overwhelmingly voted to remain a part of the country of Canada. Alberta has the world's fourth largest proven oil reserves, and much of the push by separatists to seek independence had been driven by anger over oil industry management. Well, N-Scale is in talks to sell AI computing power to Anthropic in a new deal that could be worth about$45 billion. That's according to multiple reports. The data center developer is apparently seeking this latest deal with the AI lab for a second facility at its data center campus in West Virginia.

28:16That's after striking another$45 billion agreement back in August. Now, this comes a day after Microsoft pulled out of its end scale data center deal or one specifically, one site specifically in the UK. And Reuters reporting that OpenAI is working to accelerate its fundraising efforts ahead of Anthropics IPO, saying the latest push could value the chat GPT maker at more than one point four trillion dollars. Speaking of OpenAI, a judge is ordering the Saudi national accused of planting a recording device in a conference room at the company to be detained without bail pending trial. And this came after the Saudi consulate in Los Angeles offered to pay the full bail.

28:56And Bloomberg reporting former Google CEO Eric Schmidt owns about one percent stake in Anthropic. That sets him up to see one of the largest individual windfalls when Anthropic goes public. The report adding Schmidt invested tens of millions of dollars in Anthropic Series A funding round, though it's unclear whether he has sold any of that stake, which would now be worth tens of billions of dollars. Well, with two weeks to go before the midterms, affordability remains top of mind for voters. and more than 90 percent of people on Cal. She lists the economy and cost of living as the issue that matters most, with the Iran war and foreign policy a distant second.

29:36Recent polls find many Americans say the current state of the economy is poor. However, the data shows the picture is a bit more mixed since President Trump returned to office. Food prices are up more than four percent since last January. Ground beef, chicken, milk, those are all higher, but eggs and bread prices are lower. And the stock market has been resilient, with the S &P 500 up nearly 30 percent. That's boosting the average 401k and IRA balance. Housing costs are up, with the 30-year mortgage rate topping 7.4 percent this month. Fuel prices have spiked since the start of the Iran war. Drivers are paying nearly 40 percent more for gas since President Trump's inauguration.

30:11And diesel is up roughly 70 percent. But joining me now is Mark Zandi, chief economist at Moody's Analytics. Mark, it is great to have you on the show. And that's where I'm going to start with you. This topic of affordability. It's interesting. We've had two administrations across two political parties now with certain similarities, namely that we've had wars break out during both of those time periods. We've seen big spending packages move through and inflation has stayed elevated. Your thoughts on the state of the economy right now and how it's going to funnel into the midterm elections? Well, Morgan, I think it depends on which part of the economy you're operating in.

30:50I mean, if you're high income, high net worth, well-to-do, say in the top 20 percent of the income distribution, you're doing just fine. Stock prices are up. You own a lot of stock, and that's helping you go out and spend, and that's driving the economic train. If you're the rest of Americans that bottom, say, 80 percent of the income distribution, you're struggling. You know, your real wages after inflation wages are actually falling. You're having a difficult time keeping up. Your spending is keeping up with inflation, but barely. So, you know, really, if you take averages and medians, and that's the statistics that we look at, it looks OK.

31:31You know, we're kind of hanging in there in aggregate. But it really does depend on which, you know, where you land in the economy, whether you're the well-to-do or not. Yeah. Yeah. We've had these conversations repeatedly on CNBC about what high energy prices and specifically diesel prices mean for the economy and the overall inflation picture as that funnels through to to other areas, other metrics. If you see an end to this war in Iran and you see energy prices come down, does the picture look different quickly? Yeah, it does. I mean, I think inflation is accelerated since the war. It's well above the Fed Reserve's target by about a point and a half.

32:11The vast, vast majority of that is back to the Iran war. The obvious, you know, gasoline prices, jet fuel, home heating problem. And you mentioned diesel that's bleeding into lots of other products that are delivered. Anything that is put on a truck, prices are up. So if the war were to fade away in a sense, not even that the conflict fades away, but simply that the strait opens up to the degree that we can get enough oil through and oil gets back down to something closer to 80 bucks a barrel, 75, 80 bucks a barrel. Not where we were prior to the war, but something much lower than where we are today.

32:47Then, yeah, I think inflation comes back in pretty quickly. and this whole affordability issue fades to the background like it sort of was, you know, before the tariffs and before the Iran war. Are there certain areas of the economy or certain markets where you see the affordability crisis, for lack of a better word, continuing to persist or be a sticky issue? I think about something like housing, for example. Yeah, that's that's the poster child. I mean, just to give you a statistic there, I mean, if you go back 2019 before the pandemic, the typical monthly mortgage payment was about$1 ,000, making that up a little bit.

33:26It's maybe a little bit more than that at prevailing mortgage rates at the time and house prices at the time. Now it's$2 ,200, so it's doubled in, what, six, seven years. And that's made it just completely unaffordable for folks. First-time homebuyers are completely locked out. And if you look at the surveys, you know, the folks that are most depressed by housing are younger people, people in their 20s and 30s, which is, you know, the obvious because these are people who want to get into a home and just simply can't afford it. But that's just one example. You can just go down the list here. You mentioned energy and gasoline.

34:01You can talk about child care and elder care. You can talk about health care. You can talk about groceries. You know, all of these things have risen pretty dramatically. And, you know, again, those issues were starting to fade, you know, coming into 2025. It looked like we were coming right back down to the Federal Reserve target. But then you get, you know, these policy choices and this is where we land. So if you see a different composition to Congress, I mean, just thinking about some of the policies that are being put forth in campaigns right now, are there certain policies that could change this picture?

34:35I mean, I guess how to think about that. And I realize it's a wild card. We don't quite know what's going to happen on November 3rd and what that composition of Congress is going to look like. But are there certain policies that could arrest some of this? Yeah, I mean, right back to where we were just discussing, you know, the war has to come to an end. You know, it would be nice if the tariffs were rolled back even further. They have been rolled back to a significant degree compared to where we were at the start of all this. But they're still quite elevated and adding to inflation or pressures.

35:03And I think the other policy that's playing a really important role, but least appreciated is the highly restrictive immigration policy. I think a lot of businesses are having a tough time because they're losing workers to deportation and just people are scared to come to work. And instead of raising wages, they can't raise wages high enough to attract native born workers. It's just too high. It's on the economic. They're raising prices to bring demand down to equal the supply that they can provide. So, you know, just simply doing that, you know, you get back to where we were. We wouldn't even be talking about inflation without, you know, the kind of policies that have been put in place.

35:41So but, you know, having said that, you know, each of the areas that we just discussed has its own idiosyncratic set of problems. Housing's got a set of problems. Medical care has a set of health care has a set of problems. And that takes hard work and a lot of, you know, really kind of micro kind of there's no smoking gun solution. to any one of those things. That takes, you know, specific policies designed to address the problem in that specific portion of affordability. Okay. We'll see how all of it plays out. Mark Zandi, great to have you on. Appreciate it. Sure thing. We've got a lot more to come here on Morning Call, including countdown to SpaceX's latest earnings after the bell, the key numbers you need to watch, and what analysts are saying ahead of the results.

36:22Morning Call. We'll be right back. When SpaceX reports cue the results after the bell today, this was a last minute addition to the calendar, mind you. There will be no shortage of topics. Wall Street expecting this to be SpaceX's first profitable quarter on an adjusted basis, 13 cents per share on$12.7 billion in revenue. The overarching theme for the quarter, can growth in Starlink continue to help bankroll the build out of AI as that business begins to grow revenue dramatically itself? Now, for the connectivity business, which is Starlink in all of its iterations, how much have subscribers grown from the 12 million in June.

36:58And what's ARPU as pricing increased in the U.S.? We're also looking for updates on the V3 satellite rollout and that plan for Starlink Mobile with the recent Spectrum deal. All of that will matter. So, too, will guidance on the next Starship Flight 15 and whether SpaceX will attempt to catch the ship. That would bolster both the space business and the Starlink case. Now, for AI, a number of factors in focus. This will probably matter the most. Compute capacity, cursor integration, Grok adoption, including GrokBot, new, more capable models and those neocloud deals with Q3, the first full quarter of revenue for the Anthropic Agreement.

37:30But as Deutsche Bank points out, quote, near term compute demand pricing dynamics should drive up estimates for next year. But there is uncertainty on 2028 and beyond. And the stock has increasingly traded more in line with the AI cohort as opposed to space. Ads Morgan Stanley, quote, the direction of the SpaceX stock will depend less on fine in parentheses, three Q results and more on any crumbs from a pie, meaning physical intelligence economy that's still baking in Elon's oven. So perhaps the thing that will matter the most, what the guidance is for adding more compute capacity. Elon Musk previously said five to 10 gigawatts next year, closer to 10, which represents hundreds of billions of dollars of spending.

38:15What's the CapEx plan and where's the capital coming from? All of that will be central to SpaceX and to the broader AI trade discussion and debate playing out in the markets right now. Also worth watching, any commentary on Tesla as merger speculation ratchets up. Tesla reports tomorrow. And keep an eye on stock supply. Another 1.3 billion shares unlock Thursday. And you've got more unlocking behind that. Shares of SpaceX are down about 1 % pre-market ahead of that earnings report. But straight ahead, the morning call crew teeing up the trading day ahead. And SpaceX, just the tip of the iceberg in today's earnings finance.

38:52We're going to break it all down. We're back in a moment. Here's what to watch today on the data front. Housing starts, building permits, and pending home sales figures this morning. NVIDIA's GTC event kicks off in Berlin today. And another busy day of earnings with results from SpaceX, Netflix, 3M, General Motors, United Airlines, Northrop Grumman, RTX, and GE Aerospace. And we've got two post-earnings interviews you can't miss on Squawk Box. It's 7 a.m. Eastern hour. First is General Motors CFO and a first on CNBC interview. And then it's another first on Conversation with United Airlines CEO.

39:25All right, it's time for your call sheet where we look at the topics driving the trading day ahead. Crew members today, Michael Rourke of Jones Trading, Drew Pettit of Roundhill Investments, and Frank Capillari of Cap Thesis, also a CNBC Pro contributor. We have you all here in studio. This is such a treat this Tuesday morning. Lots to get to. So I'm just going to kick it off. Frank, I'm actually going to kick it off with you. What are you watching, especially in terms of the technicals right now as we do start to see earnings season ramp? Well, specifically, I think SpaceX is an important one, of course, because I'm looking at a chart of that.

39:53It's been looking bullish. But I'm the first one to say the chart doesn't tell you much about earnings. What's important is going to be what the structure looks like afterward. So there's one specific level I'd like to see it hold is about 140. Touched that last week. It's also 50 % retracement of the run from August to October. and below that, and it's really not that much. So, you know, big air pocket, you know it's in the news, it's tied to Tesla. That's going to be an important one. Yeah, and of course, SpaceX, $2 trillion company right now, Drew. But it also speaks to, we just talked about it before the break, it also speaks to the broader AI trade and some of the angst we're seeing play out.

40:24We got neocloud stocks lower this morning again, for example. Yeah, a big concern to us is the funding. And I would say like people are looking for like the quality part of the trade right now in AI. So neoclouds in the crosshairs, always volatile. We get that. But there's some spots and some pockets that we think can still hold up. MAG-7, for example. The funding there isn't from debt. They have a bunch of cash. They were basically given free money for years, too, on top of that. So we think investors are probably going to rotate on some of these pops in the neoclouds in memory into some of the quality trades into the end of the year.

41:00Yeah. What do you think right now, Mike, especially as we do have earnings ramping. We're going to hear from Meta, for example, speaking of mega cap tech later this week to Tesla, SpaceX after the bell today. But then you also have the industrials reporting as well. And we've had this debate about whether there's a rotation under the hood in the market. Well, I think we are seeing that rotation to the Mag 7, the high quality named. But with the earnings, you mentioned with SpaceX with their earnings tonight, Like if they're going to build out, you know, up to 10 gigawatts of data center capacity next year, that CapEx number is going to be huge.

41:38Meta's CapEx number tomorrow is going to be huge. Well, whatever type of guidance they give. But this time last year, they did give guidance for the following year. So, you know, I think SpaceX is supposed to be up well over 100 percent their CapEx next year. And Meta is supposed to be about 40. There's supposed to be a 40 percent growth. So those are massive numbers, you know, as far as this AI trade goes, as far as the continued build out, as far as the semiconductors, the memory names. So I think these numbers are going to be key to earnings season, especially because they're coming before all those other big, high-quality Mag 7 names.

42:12Yeah, and of course it gets us back to the broader global bond picture as well. We'll get to that in just a moment. First, I haven't really talked about it on the show yet, but Netflix results are after the bell, too. And we've always talked about this as like a growthy tech name, not so much anymore. Now it's been trading more like a media name. But how important is a stock like that to the broader conversation? Very much so. It's a member of the Communication Services ETF, which has underperformed XLK for a while. And if you're looking at the long-term chart of Netflix, it's coming down to an important spot.

42:43I'm really aware it peaked in 2021. It's been pulling back for a long time. We need to see some good news out of it. But I think if you get something from there, then hopefully the XLC communication ETF can, you know, start moving higher and more accelerated clip because it's been trying to break out of a bullish pattern. I've been watching for a long time. Just can't get through a certain level. I just mentioned it. We're also getting a lot of industrial names, too. GM, 3M. Some of the aerospace and defense results start to come through here, too. United, even as we see crude climbing higher as well.

43:17I mean, just had to think about this convergence. of the macro and the micro as we do go through earnings season. Yeah, it's all back to rates. And I really do think the funding source, not just for you, the company, but for your customers, becomes a problem. So let's take autos, home builders. I think that's going to be a little bit more rate sensitive. Forget about the quarter. I think the commentary not going to be good there. So that to me is key. If the commentary is not good and earnings expectations are high for everything, you're going to see pockets of weakness. I think the rate sensitives are where you got to be worried.

43:53All right. Let's talk fixed income and what we are seeing more broadly in the debt markets and in the bond markets here. I mean, we were talking about at the top of the show what we're seeing in France, for example, which funnels back into the bond investor story, too, for better or worse. But but how to think about how all of this is coming together when it comes to being able to raise capital and when it comes to cost of living and when it comes to the political cycle, too, not just here in the U.S., but in other parts of the world as well, because they all seem to be coalescing. So we've had this pretty remarkable environment for quite some time where we've had easy financial conditions, nothing ever tightened.

44:29You know, up until the pandemic, we had almost two decades of inflation well under control. And now we're kind of living in this new world where you have high energy prices. Again, I'm really concerned about the oil, the moving oil we're seeing this morning, because I'm worried that we're going to continue to run into the midterms, which we got another couple of weeks. And then again, if the conflict in Iran picks back up again, we'll have an issue. And then as far as interest rates are concerned, as we're talking about this data center build out this, this, this, this is the key driver of the U.S.

45:02economy right now and is very interest rate sensitive. So as these rates push up and one thing we're not seeing that we would traditionally see is if you see this unrest in France and European yields rise like this, you might see a haven, or typically you'd see a haven bid in U.S. Treasuries, but we're not really getting that. So as the U.S., you know, the 10-year yield rises, everyone else on the corporate side, they're seeing their yields go up as well. And that's obviously making funding more expensive for this build out. All right. We've got less than a minute. I'm going to get through as much as I can here, but quickly, why aren't we seeing that?

45:33Why aren't we seeing that? Yeah, why aren't we seeing that haven? I mean, you know, Larry Fink, I think he said it on the BlackRock Conference call. He had an op-ed in the Wall Street Journal saying he thinks we're running out of capital. We've spent so much money. We're investing so much money that he says we need new sources of capital. So I think that's key here. OK, crude. You watching that chart, too? I mean, we got we're 111 for Brent. We're 108 for WTI now. I mean, it's a bullish chart, regardless of what you think about it. Keeps on making higher highs, higher lows. You saw a start at the beginning of the year.

46:03And if I'm continuing to look for stocks that are forming bullish patterns and breaking out, that continue to pop up. So I think we have to respect that, if nothing else. All right, we've got 10 seconds left. Final thought, final sentence? Buy quality on one side and with low correlation, buy a whole bunch of inflation hedges on the other side. Own two different types of risk right now. Look at this. It's great to have you all here in studio. Thank you to our call crew. Your sausage McMuffin with egg didn't change. Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just$5.

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